Access to finance remains a problem for female entrepreneurs

The women on the FT’s list of leading business pioneers have built sizeable businesses and personal fortunes.

US talk show host Oprah Winfrey’s net worth is estimated at $3bn; fashion designer Miuccia Prada’s at $4.7bn. Anita Roddick’s Body Shop was sold to L’Oréal, the French cosmetics group, for £652m in 2006.

Beyond the pure numbers their businesses have had lasting effects: The Body Shop made the idea of cosmetics free of animal testing mainstream.

But the list is short — just six of the FT’s 50 leading pioneers are female, nearly all concentrated in the field of fashion and beauty. This reflects a broader pattern. Just five of the FTSE 100 leading companies on the UK stock exchange are headed by a woman. In the US, just 23 of the Fortune 500 companies have a female chief executive.

When it comes to female entrepreneurship, a similar ratio persists. A range of everyday items, from disposable nappies to dishwashers and the circular saw, were invented by women, and women are not holding back from founding companies — about a third of all companies in the US are female-owned. But when it comes to the very largest companies, the percentage of female ownership drops away, according to a 2012 study commissioned by American Express Open, an issuer of credit cards for small businesses.

Access to finance is part of the problem. Of all the statistics, the really surprising one is this: just 2.7 per cent of all the venture capital finance raised in the US between 2011 and 2013 went to companies led by women, according to a study by Babson College in Massachusetts.

Women such as Sara Blakely, whose Spanx shapewear business has made her a billionaire, have been able to bootstrap their businesses with little venture capital involvement. But if investment finance were made easier to come by, might more women make it big?  

“I never thought of my gender when I was growing my business. I was too busy thinking about winning contracts,” says Dale Murray, who co-founded and sold a mobile phone technology company in the UK in the early 2000s. “But there is something persistent here. The fact remains that the venture capital community is male-dominated.”

Women’s need to balance work and caring responsibilities is certainly a factor. Many women, sometimes dismissed as “mumpreneurs”, set up companies to fit around school and nursery hours and may not want venture backing. Those who do may struggle to convince investors that their family commitments will not get in the way.

“Personal reasons”, understood to include family commitments, top the causes of 25-34-year-old female UK entrepreneurs deciding to shut down their businesses, according to a study by RBS, the banking group.

Network effects are part of the problem, says Candida Brush, chairman of the entrepreneurship division at Babson College. “Women are not in the network of venture capitalists and VCs have no incentive to look outside their homophilous group. [VC investors] do not have to work as hard when they stay with the same entrepreneurs again and again.” Many Silicon Valley tech companies, such as PayPal, Tesla, Facebook and Yelp, were built up by a relatively small group of entrepreneurs and funders backing each other’s businesses.  

The venture capital industry has, if anything, become more male-dominated in recent years. The proportion of women partners at US venture capital firms dropped from 10 per cent in 1999 to 6 per cent in 2014, according to a Babson study. Meanwhile, a high-profile sex discrimination case against Kleiner Perkins Caufield & Byers, a Silicon Valley VC firm, paints a picture of a world in which women may find themselves deliberately excluded from deals.

The fact remains that the venture capital community is male-dominated

Murray’s view of the sector is less extreme. She insists that good teams find money regardless of gender. But she admits, when pressed, that the relentlessly male environment can be draining. This is partly why Murray, named British Angel Investor of the Year in 2011, is stepping back from this type of financing.

Boston-based Breakaway Innovation Group is one VC trying to rebalance gender ratios. It has partnered with Babson College to run a competition to find the best female-led businesses, with a $250,000 investment as first prize.

Getting more women to the pitching stage would be the best way to change things, argues John Burns, chief investment officer of Breakaway. “If five per cent of the people who pitch me are women, I would be surprised.”

“There is such a big discrepancy between the percentage of women in the workforce and the percentage of women receiving VC dollars. It is just a huge untapped opportunity.”